Forecasts from six major banks, very little surprise potential

The Bank of Japan (BoJ) will announce its policy decision on Wednesday, September 23 at 05:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of eight major banks. 

The BoJ is likely to maintain the stimulus measures in September. How will USD/JPY react to the Monetary Policy Statement? Check out FXStreet’s BoJ preview to discover USD/JPY probable scenarios.

Standard Chartered

“We expect the BoJ to maintain the policy balance rate at -0.1% and the 10Y yield target at c.0%. The economy has shown a weak recovery trend due to continued quarantine measures in response to the pandemic. The government designated major cities Tokyo and Osaka as emergency areas (i.e., where business activity is restricted after 8pm) until 12 September. Recent high-frequency data shows that industrial production (IP) dropped 1.5% MoM in July, reversing the +6.5% increase in June. As such, we think the BoJ will not consider this an opportune time to change its monetary policy stance.” 


“There is nothing noteworthy about the BoJ policy meeting as the central bank persists with its ongoing struggle to achieve its 2% inflation target. The CPI inflation figures for August won’t alter this state of affairs as the negative inflation streak since last October stretched into another month.”


“It is likely to deliver a dovish hold, just as it did at the last policy meeting July 16. New macro forecasts were unveiled then and the bank saw targeted core inflation at 0.6% (0.1% in April) for FY2021, 0.9% (0.8%) for FY2022, and 1.0% (1.0%) for FY23. The bottom line is that core inflation is seen remaining well below the 2% target through FY23. As such, the BoJ has signaled that it intends to keep policy accommodative until FY24 at least. The BoJ is on hold for the foreseeable future as markets await the next fiscal package. We do not believe monetary policy will be impacted by the upcoming change to the LDP leadership.”


“Given that the fifth wave of the coronavirus has begun to be contained, we expect that the BoJ will maintain its current main monetary policy (YCC and ETF purchases). In addition, it extended “the Special Program to Support Financing in Response to COVID-19”, currently set to expire in September 2021, to the end of March 2022 at the June policy board meeting. Measures to support financing will also be maintained. It appears that no matter who the next prime minister is, there will be no major changes to the current main monetary policy. However, if administrative reform and regulatory reform minister Taro Kono becomes the next prime minister, there is a possibility that government pressure on the BoJ will diminish compared to the Abe and Suga administrations and the BoJ could manage the current main monetary policy more flexibly. On the other hand, Kono might advocate a greater role for the BoJ in the climate change fight.”


“No change is expected. The BoJ is on hold for the foreseeable future as markets await the next fiscal package. We do not believe monetary policy will be impacted by the upcoming change to the LDP leadership.” 


“Despite the solid economic rebound in Q2, the rest of the year is looking more uncertain. The state of emergency in 19 prefectures has been in place since before the Olympics began, and manufacturers are struggling with supply bottlenecks. Toyota, in particular, has slashed production schedules and targets. The BoJ is expected to stay on the sidelines for a long, long time.”


“Japan’s weak inflation outlook reinforces our view that the BoJ will not be tightening anytime soon and will maintain its massive stimulus in the next few years, possibly at least until FY2023. Markets are convinced that the BoJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave the BoJ.”

Danske Bank

“We expect the BoJ will keep its QQE with yield curve control policy unchanged. With the economy still hampered from the lockdown, it is waiting and see mode until pandemic programmes can be withdrawn next year.”


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